Managing The Property Profits

How Proper Accounting Simplifies Income for Investors

Most investors are eager to know what their monthly income will be, and when their profit can be deposited. The rent amount and deposit date both depend on a unit’s tenants, property manager, and work items. It’s important for owners to understand how these factors affect their profit schedule, and how proper accounting simplifies the payment process for them.

Accounting For Tenant Payments

The majority of leases grant a five-day “grace period” for delayed payments before residents incur late fees. This grace period is standard because even the most reliable tenants can experience delays when making payments, and offering flexibility on these occasions vastly improves landlord-tenant relations. The five-day grace period also prevents overbilling with late fees due to uncontrollable interruptions, such as bank server maintenance or holidays.

Other tenant-related delays, such as screening for bounced checks and collecting late fees, can take significant time to resolve. Investors who choose a property manager to complete these tasks typically receive their rental income before the 10th day of each month.

Property Management Processes

When collecting rent income, property managers can track a unit’s financial health, cover expenses, and keep accounting records organized for investors. As every owner has their own financial needs and timeline, each property manager and investor relationship is unique. Some landlords want their rental income to be paid out as a net total after expenses, while others prefer to handle their own costs after receiving a lump sum. No matter the system, owners and property managers need to be absolutely clear when discussing a property’s accounting and reporting.

Keeping Up With Expenses

Every property incurs expenses such as mortgage payments, security subscriptions, or repair fees. While automatic accounting software can help organize these expenses, Parc Management prefers to address each individually. This type of accounting makes filing taxes significantly easier than some other methods. 

Property expenses rarely arise when it is convenient. Costs such as unforeseen repairs or tenant move-outs can occur at the end of the month. Parc strongly advises most owners to keep their first month’s rental income as a reserve to help cover any later unexpected costs, without forcing their property into debt. Investors with multiple properties in their portfolio can make a personal contribution to a property with a deficit, then repay the difference to their personal account from another profitable property’s trust account. This process can be complex, and is most efficiently facilitated by a skilled property manager.

Learning From The Income

Disbursements offer insight into the health of a property, often revealing issues that can be resolved and improving a property’s performance. One of the best tools to illustrate this is the owner’s statement, a complete receipt of a property’s transactions over a customized time period. Owner’s statements typically cover one month or one half of a month, though they can be adjusted; some well-established investors prefer less frequent updates with quarterly or semiannual statements.

This process can be complex, and is most efficiently facilitated by a skilled property manager.

Owners can generate their own statements with specialized software or a highly detailed spreadsheet. Our team recommends that investors without a property manager use accounting software to create an accurate and easily readable owner’s statement, as depending on the type of accounting used, statements can quickly become complex.

Most investment properties use cash accounting or “property accounting.” This essentially means that each property is treated as though it has its own bank account. Using a trust account allows investors to quickly access their total funds from one location. Property managers can help owners categorize credits and debits from each of these properties in their respective trust accounts, making it easy for investors to see which units are performing well and which may need a new strategy.

The right property manager can offer a clear picture of financial health

Investment property accounting is a unique type of finance. A good property manager can help investors track income and expenses while preparing for a simpler tax season. A great property manager helps investors understand their property health while offering insight to improve it. For financial advice tailored to your property needs, Parc Management offers expert accounting, strategy, and property management services.

Want to learn more about how Parc can manage your property's finances? A consultation with us is completely free.

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